M/s Sons & Sons is considering two projects, A &B, with cash flows as shown below: Cash Flow of period Project A Project B -90,000 30,000 30,000 -150,000 1 72,000 35,000 3 30,000 40,000 25,000 4 30,000 a. Calculate discounted payback period, net present value and intermal rate of return for each project using opportunity cost of capital 13 % & 9% for project A & B respectively.
M/s Sons & Sons is considering two projects, A &B, with cash flows as shown below: Cash Flow of period Project A Project B -90,000 30,000 30,000 -150,000 1 72,000 35,000 3 30,000 40,000 25,000 4 30,000 a. Calculate discounted payback period, net present value and intermal rate of return for each project using opportunity cost of capital 13 % & 9% for project A & B respectively.
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter12: Capital Budgeting: Decision Criteria
Section: Chapter Questions
Problem 13P
Related questions
Question
![M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below:
Cash Flow of
period
Project A
Project B
-90,000
-150,000
1
30,000
72,000
2
30,000
35,000
3
30,000
40,000
4
30,000
25,000
a. Calculate discounted payback period, net present value and intemal rate of retum for each project
using opportunity cost of capital 13 % & 9% for project A & B respectively.
b. Which project(s) should be accepted if:
The projects are mutually exclusive and there is no capital constraint.
The projects are independent and there is no capital constraint.
The projects are independent and there is a total of $100,000 of financing for capital
outlays in the coming period.
(ii)
c. Why the cost of capital for A might be higher than for B. State possible reason(s)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fbd461b43-a8d8-45ef-baa5-5fc830055300%2F1ae9a605-8d41-42a7-b778-b9eba5f8a64e%2Fifc0bv_processed.png&w=3840&q=75)
Transcribed Image Text:M/s Sons & Sons is considering two projects, A & B, with cash flows as shown below:
Cash Flow of
period
Project A
Project B
-90,000
-150,000
1
30,000
72,000
2
30,000
35,000
3
30,000
40,000
4
30,000
25,000
a. Calculate discounted payback period, net present value and intemal rate of retum for each project
using opportunity cost of capital 13 % & 9% for project A & B respectively.
b. Which project(s) should be accepted if:
The projects are mutually exclusive and there is no capital constraint.
The projects are independent and there is no capital constraint.
The projects are independent and there is a total of $100,000 of financing for capital
outlays in the coming period.
(ii)
c. Why the cost of capital for A might be higher than for B. State possible reason(s)
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
![Intermediate Financial Management (MindTap Course…](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
![Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
![EBK CONTEMPORARY FINANCIAL MANAGEMENT](https://www.bartleby.com/isbn_cover_images/9781337514835/9781337514835_smallCoverImage.jpg)
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
![Financial And Managerial Accounting](https://www.bartleby.com/isbn_cover_images/9781337902663/9781337902663_smallCoverImage.jpg)
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,